APRA closely monitoring mortgage risks

Australian Prudential Regulation Authority chairman Wayne Byres said the watchdog is closely monitoring a rise in highly leveraged mortgages as it considers potential macro-prudential measures to cool the surging housing market.

“It’s a complex picture and we’re weighing up a raft of different considerations, there are risk metrics that tell us different things,” Byres said at a parliamentary hearing on Friday.

“The issue of concern at present is that there is an increase in our debt-to-income levels,” he said.

“But it’s offset against a number other metrics, which are going in a more positive direction from a prudential perspective,” Mr Byres said, pointing to current strong balance sheets and high quality lending standards.

“Certainly we’re cautious of the current environment in the way it could play out.

“The key issue at present that we’re watching is less prudential and more macro, it’s really looking at household debt levels, and the extent to which there is potential for household debt levels to run well ahead of income growth levels for an extended period . And I think the [Reserve Bank] governor said he would be uncomfortable with that and I would also be uncomfortable with that.”

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